Saturday, February 8, 2014

How accurate is the U.S. unemployment report?

Question:Are the
unemployment numbers in the U.S. accurate?

Answer: Unfortunately there is no decisive answer to this
question. The unemployment numbers as reported
by the U.S. Bureau of Labor Statistics (BLS) are treated as accurate by most
economists, though there is no way for a civilian to verify the accuracy. There are some independent analysts who have
attempted to conduct their own unemployment surveys, but there is too much
contradiction among these various polls to believe these to be superior to the
numbers released by the BLS.

The closest we can come to making an overall assumption as to
the overall unemployment trend is found in the collective stock price movements
of several stocks sensitive to the job market.
When the combined average price of these stocks is rising we can assume
that the unemployment rate is falling, or else is on the verge of falling. Conversely, when these stocks are falling we
can assume that conditions are not favorable for rising labor
participation.

The five stocks that most accurately reflect the overall
soundness of the U.S. business/retail economy are: Amazon (AMZN), Ebay (EBAY),
WalMart (WMT), FedEx (FDX) and Monster Worldwide (MWW). Collectively, these stocks form the basis of
the New Economy Index (NEI). The NEI
chart is shown below.

As you can see, NEI is still in an intermediate-term upward
trend. The last formal “sell” signal of
this index occurred all the way back in the early part of 2010, and it lasted
all of two months. Since then NEI has
signaled a gradual expansion of the U.S. retail economy. This assumes an improving underlying
employment trend, however painfully slow it might be.

It’s also worth pointing out that one of the components of
the NEI, namely Monster Worldwide (MWW), has shown a rather dramatic
improvement in the last few months.
Monster reported a blow-out earnings increase last week, resulting in a
25% jump in its share price. This
implies an improved picture for U.S. job hunters.

This could change later in the year with the major yearly Kress cycles bottoming into the fall. But until NEI actually gives us a "sell" signal, we should assume that the U.S. employment and retail sales picture remains fairly healthy.